NFP Midterm Exam Questions with Correct Answers Latest Update 2026/2027
What section of the IRC applies to UNCW?
•Section 501(c)(3)
•Section 501(c)(4)
•Section 501(c)(6)
•None of the above - Answers None of the above
T/F All income earned by NFPs is exempt from taxation under the IRC. - Answers False
When individuals are considering whether to make a donation to a not-for-profit entity, the
answer to which of the following questions is not typically sought?
•Will donated funds be used effectively by the entity to accomplish its purpose?
•Will the donated funds be wasted?
•How much should this entity receive?
•Is this entity profitable? - Answers Is this entity profitable?
Determine whether the following statement is an Operating, Investing or Financing Activity:
Promises collected w/o donor restriction - Answers Operating
Determine whether the following statement is an Operating, Investing or Financing Activity:
Cash received from a contributor as a good faith advance on a promise to contribute matching
funds - Answers Operating
Determine whether the following statement is an Operating, Investing or Financing Activity:
Purchase of bus - Answers Investment
Determine whether the following statement is an Operating, Investing or Financing Activity:
Principal payment on short-term bank loan - Answers Financing
Determine whether the following statement is an Operating, Investing or Financing Activity:
Purchase of equity securities - Answers Investing
, Determine whether the following statement is an Operating, Investing or Financing Activity:
Dividend income earned on equity securities - Answers Operating
Determine whether the following statement is an Operating, Investing or Financing Activity:
Interest payment on short-term bank loan - Answers Operating
Determine whether the following statement is an Operating, Investing or Financing Activity:
Interest earned on endowment - Answers Operating
•Independence may be difficult for CPAs auditing NFPs
•Especially "in appearance"
•Why? - Answers Could be donors or volunteers for these NFPs
A statement of activities prepared by a not-for-profit organization is most similar to which
financial statement prepared by a for-profit organization? - Answers Income Statement
Which of the following is a voluntary health and welfare entity?
a) A charity raising money for underprivileged children.
b) A nursing home.
c) A private medical school.
d) A hospital.
e) A preschool. - Answers a) A charity raising money for underprivileged children.
Belwood College is a private not-for-profit institution that has tax-exempt status. Which of the
following is most likely to be the specific tax-exempt status that Belwood College holds? -
Answers 501(c)(3)
Which one of the following financial statements is not required by GAAP regarding a voluntary
health and welfare entity?
a) Statement of Financial Position
b) Statement of Functional Expenses
c) Statement of Activities
d) Statement of Cash Flows
e) Statement of Operations - Answers e) Statement of Operations
What section of the IRC applies to UNCW?
•Section 501(c)(3)
•Section 501(c)(4)
•Section 501(c)(6)
•None of the above - Answers None of the above
T/F All income earned by NFPs is exempt from taxation under the IRC. - Answers False
When individuals are considering whether to make a donation to a not-for-profit entity, the
answer to which of the following questions is not typically sought?
•Will donated funds be used effectively by the entity to accomplish its purpose?
•Will the donated funds be wasted?
•How much should this entity receive?
•Is this entity profitable? - Answers Is this entity profitable?
Determine whether the following statement is an Operating, Investing or Financing Activity:
Promises collected w/o donor restriction - Answers Operating
Determine whether the following statement is an Operating, Investing or Financing Activity:
Cash received from a contributor as a good faith advance on a promise to contribute matching
funds - Answers Operating
Determine whether the following statement is an Operating, Investing or Financing Activity:
Purchase of bus - Answers Investment
Determine whether the following statement is an Operating, Investing or Financing Activity:
Principal payment on short-term bank loan - Answers Financing
Determine whether the following statement is an Operating, Investing or Financing Activity:
Purchase of equity securities - Answers Investing
, Determine whether the following statement is an Operating, Investing or Financing Activity:
Dividend income earned on equity securities - Answers Operating
Determine whether the following statement is an Operating, Investing or Financing Activity:
Interest payment on short-term bank loan - Answers Operating
Determine whether the following statement is an Operating, Investing or Financing Activity:
Interest earned on endowment - Answers Operating
•Independence may be difficult for CPAs auditing NFPs
•Especially "in appearance"
•Why? - Answers Could be donors or volunteers for these NFPs
A statement of activities prepared by a not-for-profit organization is most similar to which
financial statement prepared by a for-profit organization? - Answers Income Statement
Which of the following is a voluntary health and welfare entity?
a) A charity raising money for underprivileged children.
b) A nursing home.
c) A private medical school.
d) A hospital.
e) A preschool. - Answers a) A charity raising money for underprivileged children.
Belwood College is a private not-for-profit institution that has tax-exempt status. Which of the
following is most likely to be the specific tax-exempt status that Belwood College holds? -
Answers 501(c)(3)
Which one of the following financial statements is not required by GAAP regarding a voluntary
health and welfare entity?
a) Statement of Financial Position
b) Statement of Functional Expenses
c) Statement of Activities
d) Statement of Cash Flows
e) Statement of Operations - Answers e) Statement of Operations
